In Part 1, I discussed one of the reasons why so many loans may be falling out and escrow transactions may be getting canceled. Now, while I can not speak about other areas of the country or other Realtors/agents transactions, I can only discuss my professional experiences as an Mortgage Loan Originator (MLO) with my own borrowers here in Los Angeles & Ventura counties.
I Part 2, I would like to discuss another issue that comes up that so many sellers and their listing agents (LA) as well as buyers fail to do before getting into escrow. In failing to do their own due diligence, they leave it up to MLO's and lenders to do everyone else's due diligence for them. While I can't speak for other MLO's and lenders, I can say that me and my lenders will be doing our jobs (and we're very good at it) and we will be do our own due diligence.
I recently came across another post, Code Compliance- Don't be Caught With Your Pants Down by J Philip Faranda. While this was a good post that addressed the issue of just one of the reasons (bldg code violations) that some loan transactions get derailed, the thing I liked about this post was that JP assigns the responsibility of this particular duty to the ones who are truly responsible for it - sellers and their LA! If more sellers and their LA's were doing their own jobs better, buyers and their MLO's and lenders would be able to do our jobs better - approving and funding mortgage loans!
Here in CA, we have a document called the seller transfer disclosure statement (TDS) and all sellers and their LA are required by law (section 1102 of the CA civil code) to complete this document when selling a property here in CA.
This is where sellers and their LA are required to include any bldg code violations on the property or unpermitted work on the property. Sellers are notified umpteen times by the city/county of such violations so ignorance by the seller is inexcusable. Simply stating on the MLS "buyer to verify" is unacceptable. That is your job Mr/Ms Seller and/or Mr/Ms Listing Agent - do your jobs!
On that note, if more sellers and their LA did their jobs before ever listing the property on the market, then I can say that we would unequivocally see less loan fall-out and escrow cancellations. This is just my professional opinion based on my professional experiences with my borrowers here in Los Angeles & Ventura counties.
Furthermore, when sellers and their LA know that the property has unsatisfactory property issues and/or conditions and they have no intention of making any repairs and/or concessions for the property in order for a financed borrower to purchase the property, then they need to list the property accordingly: "as-is" and "cash offers only". Simply listing "as-is" is not good enough, it needs to also say "cash offers only" too. Don't even get me started on bank sellers who play ignorant simply because they never lived in the property.
For the record REO sellers & LA: if your listing has been in escrow before with a financed buyer and the loan fell-out or the escrow got canceled because of property conditions and/or issues and you refused to do anything to rectify the conditions and/or issues, chances are that your property is not qualified and/or eligible for financing.
Do us all favor and save all of us from wasting our time, energy and money and just list your property accordingly, "as-is" and "cash-offers only". That way, financed buyers won't waste their time (or yours) by even looking at your property. They will just automatically eliminate it from all the other available, qualified and eligible properties they have to choose from.
Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search and definitely before submitting offers on anything you are interested in buying.
The loan process is not a simple process anymore (it actually never has been) and it's because it can get really complicated and convoluted, that borrowers today need experienced professionals working on their behalf. Furthermore, buyers need to take a more active role in ensuring that they are going to actually make it to the closing table.
If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net. That's what I'm here for and I would love to be able to assist you getting an affordable home loan as well as seeing to it that you actually get to the closing table.
Deals Falling Out of Escrow? Think Twice (and do your homework) Before Making Your Offer - Part 1
Photos courtesy of flickr: l.million c.a.r. goldenwestsignarts
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Donne Knudsen
Realtor® - CalState Realty Services
DRE#: 01364050 / NMLS#: 249822
805.2069123
Serving low-medium income individuals and families as well as first time buyers with both their real estate as well as their mortgage needs including down payment assistance
Los Angeles County -- Ventura County
© 2010 - All Rights Reserved
I've seen so many TDS forms filled out with so little detail that they're nearly useless. Many agents in this area will simply use the term "buyer to verify" as a method of "passing the buck" and leaving everything to the buyer. Ironically, most attorney's in this area advise agents NOT to perform the verification of permits on behalf of clients because any ommission could impart liability.
I like you point though, listing agents should do a better job of getting accurate disclosures completed.
So many great points here, Donne! The condition of the property has a huge impact on the financing options. I lost (thankfully) a deal recently where the BA was dogging me to order the appraisal when a property inspection had already identified several big red flag items that would have to be remediated before the property would be eligible for FHA. The inspection was sent to the Asset Manager who refused to discuss whether or not they would make the repairs until the appraisal was done. Round and round and round she goes......
Bryan - I hate to see that "buyer to verify"! All that says to me is a either a seller who is trying to hide something (and consequently breaking CA state civil codes) or a lazy listing agent. It is so true too that it is nothing more than passing the buck for the buyer to do the job that is supposed to be done (by law) by the seller and the listing agent. As for attorneys who are advising their clients to break the CA law, there's a whole other torture that should be reserved for those sleazy scoundrels.
Ed - See the whole problem I have with the scenario you describe is that my borrower is expected to spend time, energy and money (appraisal fee) on a property that has already been deemed unqualified for financing. AAARRRGGGHHH!!! That BA sounds like a !#$%^&* moron who needs to be reminded of who they work for and whose best interests they should be serving.
Don't even get me started on that Asset Manager and LA sitting on the inspection report who now undeniably know that there are substandard property conditions and issues and that, by law (I assume the property is in CA), must be disclosed. I'm curious, after your borrower canceled the escrow and the property went BOM, were the property conditions and issues disclosed?
Thx for stopping by guys; I really appreciate it. Have a good day and a wonderful weekend too. :)
It's worse than that, Donne. The BA sent the deal to another lender (shady local one) who immediately ordered the appraisal and did the loan. Oh, and did I mention that the copy of the borrower's Driver License showed that it had been altered? ;-]
Sadly even we do advertise some REO properties this way other BA just don't pay attention and send offers contingent upon financing anyway even though we CLEARLY STATE "CASH OFFER ONLY".
Ed - WOW!!! Probably a good thing you got out from under that one.
Tammy - Now see, you did it right! You knew the property wasn't eligible for financing so you clearly stated "cash offer only". The BA is the one who's being ridiculous here by disregarding your listing info. Sorry, I have no mercy for idiots.
Thx for stopping by folks; I appreciate it. Have a good day and a great weekend everyone. :)